Ding Dong School

By Lloyd Graff

I’ve been talking to a lot of smart people and reading some well-researched material so I can pretend I know stuff that you don’t already know.

One thing I really wanted to get my brain around is whether well-paying manufacturing jobs will be “coming back” to the United States.

My conclusion – old jobs are not coming back, but millions of new jobs will be created. Some will pay well, others will not. People will be rewarded for being industrious, flexible, creative and well-prepared for being able to add value in the cracks where automation and artificial intelligence have not figured out how to penetrate yet.

I remember, back in the day, when Graff-Pinkert needed a machinist who could be trained to be a machine tool rebuilder. We had a variety of applicants including one Union member from the Pullman Works plant of the International Harvester Corporation. He was a pleasant guy, but his training at Harvester had left him completely helpless to work in a small shop that valued versatility and efficiency. We asked him to display his skills on a lathe and he confessed that at IH he had only run round bars. We thanked him and told him he was not prepared to work for us. As he walked out he asked plaintively if his buddy could have the job, because “he knows how to run hex.”

That Harvester plant is long gone. The 10,000 workers that trudged to work, paid their Union dues to the Teamsters year after year, and produced the same axles and fenders on the same machines decade after decade are retired, dead or working at Home Depot today.

Harvester will never be resurrected. We have lost 40% of the plants with 1,000 employees or more in recent years. Big unionized factories are dinosaurs and in a few more years they will have almost totally vanished.

The last bastion of Union membership is in government. Half of Union the workers today work for taxpayers, but the inequities in the contracts negotiated by weak or corrupt elected or appointed nabobs will come back to haunt them. According to Michael Hicks, a very smart professor I talked to this week from Ball State in Muncie, Indiana, a Chicago teacher’s pension today is bigger than that of a Three-Star General. The Charter School movement in places like Chicago, which has special appeal to African American parents, poses a big threat to status quo education, which is why the Teachers’ Unions despise the trend.

******

The “good jobs coming back” theme took another hit in the scrotum in a conversation I had with Steve Tamasi, the head of Boston Centerless Corp.

His company is one of the foremost suppliers of ground stock, much of which goes to companies using Swiss-type sliding headstock machines to supply the medical device, electronics, and aerospace industries. Tamasi’s firm is doing well, but with more than half of his volume coming from the medical device sector he has been fighting the mega merger trend in the industry. The medical device lines are maturing and consolidating. The 2.3% tax on revenue to finance Obamacare also punished the industry. When organic growth shrinks, big companies merge. It’s what they do. Then they do their magic. According to Steve Tamasi, they reduced inventory and hammered on the supply chain. It’s Merger 101. Then they cut employees, reduced the number of factories and declared bonuses for the brilliant executives who survived the knife.

******

A robot places boxes of Twinkies into shipping boxes at the Hostess plant in Emporia, Kansas which produces 1,000,000 Twinkies a day.

I recommend a terrific article in The New York Times on the purchase and sale of Hostess Twinkies and Ding Dongs brands. Two hedge funds partnered on the deal, Leon Black’s Apollo Global Management and Metropoulos Fund owned by Dean Metropoulos. They bought the brands and eight factories at a bankruptcy auction in 2013 for $410 million which they borrowed against their assets and their reputation for shrewdness. The money came from the Texas Teacher’s Pension Fund and other institutions.

An acquaintance of mine who works for a prominent foundation in Chicago told me that his $1 billion-dollar institution seldom gets a chance to get in on a deal like Hostess Brands because the hedge funds can usually fund the most interesting deals with a few days of calls and meetings in New York. Princeton University alone has a $90 billion endowment fund and they are always looking for Hostess-Ding Dong kinds of deals.

Mr. Metropoulos specializes in food deals. He made a killing on Vlasic Pickles. He closed five of the eight Hostess bakeries, automated the bakery in Emporia, Kansas to maximize the output, expanded a factory in Columbus, Georgia with incentives from the state, streamlined the supply chain and bludgeoned suppliers. He turned Hostess into one humdinger of a deal. In a few years, Black and Metropoulos sold the company to another hedge fund for $2.3 billion. Head count at Hostess had shrunk from 8,000 to 1,400 people. The Union bakeries were the first to go. I think there are still some “good jobs” in Emporia, Kansas.

I am not condemning Black and Metropoulos. If they had not bought Hostess some other hedge fund would have.

With automation and artificial intelligence coming on even stronger in the 2020s there will be even fewer of those “good factory jobs.” Today factory jobs comprise 9% of the jobs in the United States. Even without the competition from China and Mexico that number will fall. And China and Mexico face the same issues we have here – stagnant wages and shrinking, “good jobs in the factory.”

The trends don’t lie. Teach your kids how to pitch.

Question: Would you consider $13/hour jobs at Amazon “good jobs?”

Share this post

11 thoughts on “Ding Dong School

  1. AvatarMindy

    Lloyd,

    Your comment, “People will be rewarded for being industrious, flexible, creative and well-prepared for being able to add value in the cracks where automation and artificial intelligence have not figured out how to penetrate yet.” resonated with me.

    I am fluent in Japanese (over the phone, no one can recognize that I am not a native speaker), and that is a skill that is a LONG way from being replaced with artificial intelligence. Don’t let Google Translate or some trendy software fool you… Japanese is so different from English that only the human mind can accurately translate. I feel secure that during my lifetime that skill will always give me an edge! It’s how I got this job at Okuma and something I will always have in my back pocket.

    Thank you for always keeping us thinking!

     
  2. AvatarChuck SNow

    No I would not work for anyone for $13 per hour. That is barely enough to pay my property taxes and grocery bills. Unfortunately many people are forced to take these jobs and that is why our middle class is disappearing. Those great middle class jobs at Harvester and at meat packing plants are long gone. The plants either mothballed, mechanized or filled with undocumented workers working through temporary labor pools for minimum wage.
    Sending undocumented workers back to wherever they came from will not improve things ever. What will is getting back to some level of fairness in the existing markets. Unfortunately that is a task that is much to large and complicated for both present and new administrations.

     
    +5
    1. Avatarrick

      “No I would not work for anyone for $13 per hour”

      So you would rather take the goverment handout lik too many others?
      Or play the permanent disability game?

      just asking…

       
      +2
  3. Lloyd GraffLloyd Graff

    Does anybody remember the TV Show Ding Dong School with Francis Horwich. Early Television, 1952-56. Precursor to sesame Street?

     
  4. AvatarDick Crosby

    And the global population keeps expanding at prodigious rates. Including here in the Us. Including here in my family.
    I’m an only child, born at the depths of the depression in Sept., 1932. Only the wealthy or the careless had more than one kid. My 1st wife & I created (2), and adopted (2) more.
    Present wife brought (3) more to the table. We claim approx.
    (24) gkids, and (10) ggkids. Those single spindle screw machines keep right on working. ZPG (Zero Population Growth) is a fantasy.
    Maybe not Georgia and I, but the world is screwing itself out of a place at the table. I/we fear for those down the line.
    Including those we know, love, and worry about.

     
    +1
  5. AvatarJeff Kopp

    They are also producing a product at least 1/3rd smaller;
    I’ve stopped buying hostess because of the stoppage but more importantly because they short cut the most important thing; the ding dong or Twinkie or suzy q; the product;

     
    +1
  6. Avatarrick

    Interestingly, I have been speaking about this for years, WHY are we allowing the EXCESS influx of ILLEGAL immigrants from the third world with no education, no knowledge of the English language or desire to learn and NO marketable skills. They cannot even be greeters at Wally World. (Nevada has enough prostitutes, and you need to look the part.) Technology and automation will continue to grow at an exponential rate and leave so many in the dust, only to become more leeches sucking on the government teat. THAT YOU AND I WILL PAY MORE AND MORE FOR!
    We, in NYC, are being forced to increase pay to $15/hr who are not worth $10/hr.
    You would think that these people would be happy to have a job, yet they still come in late day after day or just don’t show up.
    Those with a work ethic do what they must to provide for themselves and family.
    Sadly, that is something that comes from ones upbringing , and today’s snowflakes just melt down…

     
    +7
  7. Avatarallen

    Sorry to rain on your parade Lloyd but I already knew those well-paying manufacturing jobs weren’t coming back.

    Their existence was partly a result of the free enterprise system and partly a result of World War II. Our economy and infrastructure wasn’t shattered and we escaped for quite a while the worst aspects of the attractions of socialism. Heck, we’re still an outlier in that respect. Obamacare appears to have been a Pyrrhic victory for the left and it wasn’t what the left really wanted anyway.

    Professor Hicks is definitely right about the pension mess although he might have clued you in on the cause.

    Back when organized labor started really getting its claws into government employment the membership, as always, wanted more. Trouble was the citizenry was balking at raising taxes to cover that “more”.

    No problem. The state pension authorities, part of government and thus vulnerable to political pressure of which the government unions could exert a great deal, simply assumed that unreasonably high investment returns were the new normal.

    They weren’t.

    So here we are a couple of decades later and the income that those investment returns were supposed to produce never materialized. The pension obligations however didn’t follow suit so now a fair number of states are looking at unfunded pension obligations that vary between “man, that’s pretty bad” all the way to “weez all gwine tuh die!”.

    To circle back to those “good factory jobs” their anomalous nature is getting harder and harder to ignore mightily as the left tries.

    Currently the left’s pushing the narrative that a job exists to fund the lifestyle of the employee. Of course that’s nonsense but by a dint of persistence along with the public’s desire to believe that’s true organized labor and the political left are hoping to use that narrative to get a bump in the minimum wage.

    Troublesomely, some jobs just aren’t worth the minimum wage which would simply be an opinion were it not shared, ever so unwillingly, by organized labor.

    Buried within the news about the push for a minimum wage bump is the fact that a bunch of unions in cities where the minimum wage has been increased have petitioned those governments to bargain for sub-minimum wages for their members. Why would a union do that?

    Two reasons.

    First is that some jobs simply aren’t worth the minimum wage so those jobs will disappear union or not. Second, is that such a waiver would allow union members to do what they seldom can – undercut the competition. Better a sub-minimum wage then no wage at all. And no dues either.

    But I’m an optimist. The lack of opportunities in what were formerly “good factory jobs” will result in new or formerly overlooked jobs emerging. We’re an innovative species.

     
    +2
  8. Avatarding dong dulley

    In 36 years in the job shop biz I’ve lernt to run ’em all….
    Round, Hex, Squire, and yes, the much feared Oblong!
    Shame the Ding Dongs now need Viagra…

     
    +27

Comments are closed.